Benjamin L. Ginsberg, a Republican election law specialist whose role as an adviser to Swift Boat Veterans for Truth led to his resignation from the Bush campaign, paid his Democratic rivals a grudging compliment. "It's ironic," he said, "that the massive amounts of special interest soft money being spent by Democratic 527s on GOTV [get-out-the-vote] efforts could be the difference in the first election after McCain-Feingold was supposed to stanch the role of special interests."
527s for Soft Money
Twenty months before the law took effect, Harold Ickes, a former chief of staff to President Bill Clinton, sent out a 12-page warning to Democrats about its potential effect. "The ban on the use of soft money by national political parties will greatly advantage the Republicans," Ickes wrote March 12, 2001. "Were the Republicans smart, they would vote to a person to enact [McCain-Feingold] word for word, and laugh all the way to the next election."
The math appeared inescapable. Had McCain-Feingold applied in 1999-2000 and soft money -- large, unregulated contributions from individuals, corporations and unions -- been eliminated, the GOP would have outspent the Democrats by a crushing $448 million to $270 million, Ickes wrote.
McCain-Feingold eventually would limit individual hard money contributions -- federally regulated campaign contributions -- to $2,000 to a federal candidate and to $25,000 to a political party. The law also would prohibit political parties and federal candidates from accepting soft money.
Ickes saw only one way out: independent, nonparty, nonprofit 527s and 501c groups that under the law could still receive large soft money donations. Many of the Democratic Party's leading operatives, including Democratic National Committee Chairman Terence R. McAuliffe, reached the same conclusion. Meeting at the DNC and in congressional offices, they launched a secret effort to continue the flow of soft money to nonparty groups even as their Democratic elected leaders publicly pressed for an end to soft money.
"We would laugh bitterly when we saw Democratic senators on the floor saying, 'Let's get big money out of politics and go back to grass-roots politics,' " said one of the key operatives, who did not want to be identified.
But the first efforts of these Democratic strategists and their allies in organized labor to create 527 organizations ended in failure. A group called the Partnership for America's Future, to be financed with as much as $20 million contributed by the AFL-CIO's 63 member unions, fell apart because of a bitter dispute among organized labor leaders.
Steve Rosenthal, the AFL-CIO's former political director, who had created the partnership, began meeting with other Democrats, including Ickes and Ellen Malcolm, founder of EMILY's List. Their solution was to create ACT. The fact that it "was not going to be a wholly owned subsidiary of labor," said Service Employees International Union's Gina Glantz, made it possible to solicit large donations from wealthy liberals who might otherwise have been wary of investing massive amounts of money in a group controlled by the AFL-CIO.
Meanwhile, Soros, long active in promoting democracy in what once were Eastern Bloc countries and increasingly angry at President Bush, decided he would become engaged in American politics. He hired political consultants Tom Novick and Mark Steitz to come up with a strategy.
They interviewed many of the activists who had been discussing 527s since McCain-Feingold was passed and found that ACT tentatively planned to mobilize voters in four or five states at a budget of $25 million. Ickes was planning to create The Media Fund to run issue advertising (about $50 million worth) attacking Bush's record between April and August when a Democratic primary winner would be outspent by the unopposed incumbent.
Soros turned those plans on their head. At a two-day meeting at his Southampton, N.Y., home in July 2003, he convened a group of about 15 Democratic activists. Novick and Steitz presented their plan, advocating "a much larger and earlier ground game given the timing, given that Bush was going to have a money advantage." Their research showed that, in close elections, airwaves become so saturated with advertising that voters begin to tune out. "Late ads would likely be ineffective in a polarized situation," Novick said.
The next morning, Soros said he told the Southampton group he "was not particularly keen on paying for political advertising." Soros asked what it would cost to expand the ground game to all 17 swing states (since narrowed to 13 states). The consultants said there was no time to waste, that one horse had to be picked among the 527s to signal to donors which group would take the lead. ACT was the choice.
To get started, Malcolm said, they would need three times the proposed budget and an immediate commitment of about $25 million. Soros pledged $10 million, and so did Lewis. Rob McKay, an heir to the Taco Bell fortune, Robert D. Glaser, founder and CEO of RealNetworks Inc. software company in Seattle, and others pledged the rest. Malcolm volunteered to be president and raise an additional $75 million.
'This Is the Ballgame'
But the optimism coming out of Southampton quickly collided with the chilly reality of the post-McCain-Feingold era. Soon after Soros's donation was disclosed in August, the billionaire came under attack, particularly from the Republican National Committee, which declared, "George Soros has purchased the Democratic Party." The RNC also challenged ACT's legality.